Vietnam’s economy grows 6.8 percent in 2017, hitting 10-year high

Vietnam's economy has expanded by 6.8 percent in 2017, beating the target of 6.7 percent that has been described by many experts as too “ambitious”. Photo by VnExpress

The country has defied the odds after a slow start to the year and surpassed its own ‘ambitious’ target.

Vietnam’s economy has expanded by 6.8 percent this year, slightly higher than the initial target of 6.7 percent, official data revealed on Tuesday.

Growth of 6.8 percent is the highest rate to be recorded in Vietnam in the past decade, putting the country’s total economy at more than VND5,000 trillion ($220 billion), with a per capita income of $2,385, up $170 against 2016, according to the latest data from the General Statistics Office.

The target of 6.7 percent had been described by many experts as too “ambitious”, and most global financial institutions predicted that Vietnam would fall short of this goal.

However, HSBC in October revised up its growth forecast to 6.6 percent having lowered from 6.4 to 6 percent in July, saying that July-September growth in Vietnam was “surprising”.

The World Bank estimated that growth would accelerate slightly from last year to 6.3 percent, matching the forecasts made by the Asian Development Bank (ADB) and the International Monetary Fund.

But Vietnam backed itself to exceed the set target.

In September, the government instructed the Ministry of Finance to put on hold a series of proposed tax hikes to make life easier for local businesses and the growth target more achievable. The ministry had been planning to increase a number of different taxes and fees, including raising VAT from 10 percent to 12 percent.

The central bank in July reduced its lending interest rate by 0.25 percent to 6.25 percent for the first time in three years to boost economic growth, as many Vietnamese companies still rely heavily on bank loans.

The results paid off eventually while the number of new companies in 2017 hit a record high of 127,000, well above the record of 110,000 firms set last year.

New companies contributed around VND1,300 trillion to the economy this year, according to the Ministry of Planning and Investment.

Of the 6.8 percent GDP growth, the service sector contributed the most with 2.87 percentage points, followed by industry and construction with 2.77 percentage points.

In October, Deputy Prime Minister Vuong Dinh Hue told a meeting of the legislative National Assembly that Vietnam needs to stop relying on crude oil and focus on tourism to ensure its economic growth.

“It is better to welcome 1 million tourists than trying to find 1 million tons of crude oil because tourism is more eco-friendly and safe for the economy.”

The deputy PM said that tourism has a direct impact on the service sector, so more tourists means higher growth.